Simpson and Commissioner of Taxation (Taxation)

[2019] AATA 196

Simpson and Commissioner of Taxation (Taxation) [2019] AATA 196 (19 February 2019)

Division:TAXATION AND COMMERCIAL DIVISION

File Number:          2018/5078

Re:Faye Simpson

APPLICANT

AndCommissioner of Taxation

RESPONDENT

DECISION

Tribunal:Deputy President S A Forgie

Date of decision:              19 February 2019

Place:Melbourne

The Tribunal decides to:

refuse the applicant’s application for an extension of time within which she may lodge an application for review of a decision of the respondent dated 12 September 2017.

[sgd].....................................................................

Deputy President S A Forgie

Catchwords

PRACTICE AND PROCEDURE – EXTENSION OF TIME – application for an extension of time – taxation on sale of property – whether property owned by SMSF – no discretion to deem existence of SMSF – no prospects of success – application refused

Legislation

Administrative Appeals Tribunal Act 1975

Administrative Decisions (Judicial Review) Act 1977

Federal Court of Australia Act 1976

Income Tax Act 1986

Income Tax Assessment Act 1997

Income Tax Rates Act 1986

Superannuation Industry (Supervision) Act 1993

Taxation Administration Act 1953

Cases

Australian Broadcasting Tribunal v Bond Corporation Holdings Limited & Ors [1989] FCA 44

Budd v Secretary, Department of Education, Employment and Workplace Relations

[2008] FCA 1540

Comcare v A’Hearn [1993] FCA 498; (1993) 45 FCR 441; 119 ALR 85; 18 AAR 366

Dandaven v Harbeth Holdings Pty Ltd [2008] FCA 955

Gallo v Dawson [1990] HCA 30; (1990) 93 ALR 479; (1990) 64 ALJR 458

Hunter Valley Developments Pty Ltd v Cohen, Minister for Home Affairs and Environment [1984] FCA 176; (1984) 3 FCR 344; 58 ALR 305; 7 ALD 315

Phillips v Australian Girls’ Choir Pty Ltd & Anor [2001] FMCA 109

REASONS FOR DECISION

Deputy President S A Forgie

1. On 11 May 1991 and as an investment, Ms Simpson bought a unit in a group of six units in a suburb of Melbourne and held the title in her own name.  Four other members of her family each purchased a unit in the same group.  Ms Simpson entered a contract for the sale of her unit in January 2016.  Settlement took place on 21 December 2016.  Ms Simpson included the capital gain she had made on the sale of the unit in the income tax return she lodged in respect of the 2016 income year.  The Commissioner of Taxation (Commissioner) assessed the capital gains as part of Ms Simpson’s income for the 2016 year.  He issued his assessment on 11 July 2017 and, on 21 July 2017, Ms Simpson objected to the assessment.  She did so submitting that the Commissioner should have assessed capital gains tax (CGT) on the basis that the unit were an asset in a self-managed superannuation fund (SMSF).  The Commissioner disallowed her objection in an objection decision dated 12 September 2017. 

2. Ms Simpson complained to the Inspector General of Taxation (IGT) about the objection decision but he advised her on 22 August 2018 that he did not have authority to further review it.  The Commissioner himself could not review the objection decision for he had exhausted his powers in making the objection decision.  The IGT’s advice was that she seek review of the objection decision in the Tribunal or lodge an appeal against it in the Federal Court.  As she was outside the 28 day time limit to apply to the Tribunal, Ms Simpson applied for an extension of time within which to lodge her application for review of the objection decision.  She did so on 31 August 2018.  I have decided to refuse Ms Simpson’s application to extend the time within which she may lodge an application to review the Commissioner’s objection decision dated 12 September 2017.

   THE SUBMISSIONS

3. Ms Simpson submitted that the Commissioner has a discretion to treat the unit as having been held within an SMSF.  She observed that the Commissioner had noted that she had reported the rental income from the unit by way of her personal taxation returns as she had also done with the dividend income she received.  Ms Simpson then went on to consider why this information had been important to the Commissioner.  She said:

   “I can only assume that this was important because of the SMSF condition that all assets are reinvested to grow and preserve asset base for retirement. The ATO assumption appears to have been this was not the case and preferred to the interpretation that rent was used as personal disposable income (untrue). This conclusion is contrary to the evidence provided in each tax return which showed that all share transactions were on the basis of Dividend Reinvestment Plans, New Share purchases, investment in managed funds and maintenance on the Kew property as well as repayment of debt. The above actions resulted in ‘arm’s length’ investments (and would be ‘effectively locked away until retirement’) and as such was an appropriate use of the income coming from shares, managed funds etc. For your information I have attached share transactions reports showing DRP’s in Blue Chip companies. Note the sale of WOW shares in 2009 was for repairs of the Kew property including resurfacing of the tennis court and pool and contribution to a building maintenance fund and paying down debt on Managed Funds. Sold WBC shares in June 2010 paid out the loan on the Kew property.

   The other reason for the ATO mentioning this as a “relevant” fact could have been the lack of a separate bank account through which income was managed. I did have two separate accounts, one for “personal” expenses and the other for “business” expenses the latter for my private psychology practice and anything for the Kew property. My professional income was such that I had no need to use invested fund income. Again all these aspects were detailed in tax returns.

   Lastly, I continue to believe my argument for applying the “0% tax in retirement” scenario to be well founded and request the ATO to reconsider their response or provide further information. In the absence of a clear directive based on legislation it is inappropriate to “just nominate” any legislative tax point as having precedence over any other. This may include an open finding where there is no relevant legislation (which needs to be addressed in the near future). The CGT charge as applied to me has effectively undermined the Govt’s intention re superannuation.”[1]

   [1] Letter to ATO dated 29 May 2018 at 1-2

1. In essence, Ms Simpson’s submission is set out in her further letter to the ATO dated 11 May 2017 and 21 July 2017 and also in a letter to the Tribunal dated 13 December 2018.  The first of these letters summarised the issues in one paragraph:

   “I would like to argue that despite the property not being held formally in an SMSF the management of the property since purchase would nevertheless fulfil the purpose and intent of the SMSF legislation. The subsequent administration of the property would have met all the compliance issues as currently understood for a Complying Superfund in respect to all reporting and auditing obligations. The same Body Corporate and (separately) a Real Estate Agent have managed the property since its purchase in 1991 and until it sale in 2015/16. Any excess rent remaining after outgoings and fees was used to build a small share portfolio. All transactions (rental, share purchases and dividend reinvestments etc.) were fully documented in all tax returns with the same tax agent.”[2]

   [2] Letter to ATO dated 11 May 2017 at 2

POWER TO EXTEND TIME WITHIN WHICH TO LODGE APPLICATION FOR REVIEW

1. Section 29(1) of the Administrative Appeals Tribunal Act 1975 (AAT Act) sets out the way in which a person may apply to the Tribunal for review of a decision that Parliament has stated that it may review. Section 29(1)(d) states that, where the decision has been recorded in writing and given to the person, the application must be lodged in the Tribunal in the prescribed time. Generally, the prescribed time is the period beginning on the day on which the decision was made and ending on the 28^th day after a document setting out those terms was given to the applicant.  That is provided in s 29(2)(a).

1. Section 14ZZA(a) of the Taxation Administration Act 1953 (TAA) provides that, subject to the modifications set out in Division 4 of Part IVC of that legislation, the AAT Act applies in relation to the review of reviewable objection decisions. Section 14ZZC modifies s 29 by providing that it is to be read as if ss 29(1) to (6) were omitted and replaced by a new s 29(1). The substituted s 29(1)(d) provides that an application for review of an objection decision must be lodged within 60 days after the person making the application has been given a copy of that decision.

1. The TAA does not modify the operation of the remaining provisions in s 29. In particular, it does not modify the operation of s 29(7) which provides that:

   “The Tribunal may, upon application in writing by a person, extend the time for the making by that person of an application to the Tribunal for a review of a decision (including a decision made before the commencement of this section) if the Tribunal is satisfied that it is reasonable in all the circumstances to do so.”

1. Section 29(7) of the AAT Act does not give any indication of the criteria that might be relevant in deciding whether it is “reasonable in all the circumstances” to extend time.  In considering the manner in which the discretion to grant an extension should be exercised, regard is frequently paid to the principles set out by Wilcox J in Hunter Valley Developments Pty Ltd v Cohen, Minister for Home Affairs and Environment[3] (Hunter Valley), which was decided in the context of an application under s 11 of the Administrative Decisions (Judicial Review) Act 1977 (ADJR Act). Section 11(1)(c) permits an application to be lodged “… within such further time as the court concerned … allows.” 

[3] [1984] FCA 176; (1984) 3 FCR 344; 58 ALR 305; 7 ALD 315

1. After noting that s 11 of the ADJR Act does not set out any criteria to be followed in exercising the Court’s discretion and that there had been a number of decisions of judges of the Federal Court all sitting at first instance, he distilled six factors that are relevant in deciding to exercise the discretion. The first factor[4] was modified by the Full Court of the Federal Court in Comcare v A’Hearn[5] in the context of an application to extend time lodged under the AAT Act.  Allowing for that modification, the factors were summarised by Federal Magistrate McInnis, as he then was, in Phillips v Australian Girls’ Choir Pty Ltd & Anor[6] when he said:

   [4] It read in part that “It is a pre-condition to the exercise of discretion in his favour that the applicant for extension show an ‘acceptable explanation of the delay’ and that it is ‘fair and equitable in the circumstances’ to extend time …”: (1984) 3 FCR 344; 58 ALR 305; 7 ALD 315 at 348; 310-311; 320

   [5] [1993] FCA 498; (1993) 45 FCR 441; 119 ALR 85; 18 AAR 366

   [6] [2001] FMCA 109

   “         In the light of A’Hearn’s case, it is clear that at least one of the principles referred to by Wilcox J in the Hunter Valley decision needs to be modified namely that it should not be any longer regarded as law that the inexcusable delay on the part of a solicitor should be visited upon the client and nor should it be a principle that there is in fact a pre-condition to the exercise of discretion in favour of the applicant for extension to show an acceptable explanation for delay or that it’s fair and equitable in the circumstances to extend time.  In the light of the decision in Ahearn’s [sic] case it is useful to set out in modified form the relevant principles in relation to the exercise of the Court’s discretion when considering an extension of time in a human rights application based upon those principles distilled by Wilcox J in Hunter Valley as follows:

   1. There is no onus of proof upon an applicant for extension of time though an application has to be made.  Special circumstances need not be shown, but the court will not grant the application unless positively satisfied it is proper to do so.  The ‘prescribed period’ of 28 days is not to be ignored (Ralkon v Aboriginal Development Commission (1982) 43 ALR 535 at 550)

   2. It is a prima facie rule that the proceedings commenced outside the prescribed period will not be entertained (Lucic v Nolan (1982) 45 ALR 411 at 416). It is not a pre-condition for success in an application for extension of time that an acceptable explanation for delay must be given. It is to be expected that such an explanation will normally be given as a relevant matter to be considered, even though there is no rule that such an explanation is an essential pre-condition (Comcare v A’Hearn [1993] FCA 498; (1993) 45 FCR 441 and Dix v Client Compensation Tribunal (1993) 1 VR 297 at 302)

   3. Action taken by the applicant other than by making an application to the court is relevant in assessing the adequacy of the explanation for the delay.  It is relevant to consider whether the applicant has rested on his rights and whether the respondent was entitled to regard the claim as being finalised. (See Doyle v Chief of Staff (1982) 42 ALR 283 at 287)

   4. Any prejudice to the respondent, including any prejudice in defending the proceeding occasioned by the delay, is a material factor militating against the grant of an extension. (See Doyle at p 287)

   5. The mere absence of prejudice is not enough to justify the grant of an extension. (See Lucic at p 416)

   6. The merits of the substantial application are properly to be taken into account in considering whether an extension of time should be granted. (See Lucic at p 417)

   7. Considerations of fairness as between the applicant and other persons otherwise in a like position are relevant to the manner of exercise of the court’s discretion (Wedesweiller v Cole (1983) 47 ALR 528).”[7]

   [7] [2001] FMCA 109 at [10]. In Budd v Secretary, Department of Education, Employment and Workplace Relations, Cowdroy J approved and applied these factors in the context of s 44(2A)(a) of the AAT Act: [2008] FCA 1540 at [19]. Section 44(2A) provides that an appeal instituted under ss 44(1) or (2) shall be instituted within the time set out in s 44(2A)(a) and in such manner as is prescribed by the Rules of Court made under the Federal Court of Australia Act 1976: AAT Act; s 44(2A)(b).

1. Principles of this sort are relevant when considering whether to extend the time within which an application may be made to the Tribunal but, in Hunter Valley, Wilcox J made it clear that he did not intend to set out an exhaustive statement of the principles to be considered.   A similar sentiment was expressed by Burchett J, with whom Sheppard and Beaumont JJ agreed, when he said in Australian Broadcasting Tribunal v Bond Corporation Holdings Ltd & Ors:[8]

   “… The discretion is conferred by the Act in the widest terms.  It can only be read down by reference to the subject matter, scope and purpose of the statute (see Minister for Aboriginal Affairs v. Peko-Wallsend Limited [1986] HCA 40; (1986) 162 CLR 24 at 40). Having regard to considerations already discussed in these reasons, an examination of s. 92FABsuggests that the discretion to extend the period was conferred upon the Tribunal because it was impossible for Parliament to legislate precisely in respect of all the various situations that would arise.  The task of balancing the public and private interests involved in each individual case was therefore left to the Tribunal.  It would be quite inconsistent with this statutory scheme to permit the Tribunal to attempt itself the task which Parliament eschewed of laying down a rigid rule governing all cases. …”[9] 

   [8] [1989] FCA 44

   [9] [1989] FCA 44 at [25]

1. In light of these principles, it can be seen that considerations of the sort set out in Hunter Valley and Phillips v Australian Girls’ Choir Pty Ltd & Anor may well be relevant but a view as to whether or not they are relevant depends on a consideration of them in light of the matter, scope and purpose of the enactment conferring power on a decision-maker to extend a time limit.  Whether they are the only criteria that are relevant depends upon the same consideration but also upon a further principle that underpins all of the principles.  That principle is that the extension of time provisions are intended, as in a court:

   “… to ensure that those Rules which fix times for doing acts do not become instruments of injustice.  The discretion to extend time is given for the sole purpose of enabling the Court or Justice to do justice between the parties …”.[10]

   [10] Gallo v Dawson [1990] HCA 30; (1990) 93 ALR 479; 64 ALJR 458 at 480; 459 per McHugh J

1. In the particular circumstances of the case that I must consider, Part IVC of the TAA provides a system for review of certain decisions made by the Commissioner or, in limited circumstances, with his failures to make a decision. It is a system that first requires the Commissioner to take another look at the decision he made in the first instance. If a taxpayer continues to be dissatisfied with the decision that the Commissioner then makes, he or she may apply to the Tribunal for review. A taxpayer has 60 days to consider his or her position and to decide whether to do so or not. There is nothing in that scheme of review that suggests to me that I should have regard to criteria other than those set out in Hunter Valley as modified by Phillips v Australian Girls’ Choir Pty Ltd & Anor.

1. The weight that will be given to each criterion will vary from case to case.  With one exception, one criterion is not inherently or necessarily more weighty than another.  An application for an extension of time is not decided on the basis of whether more criteria are found to favour, or not favour, the application.  Essentially, the criteria are simply aids to decide whether it is fair to extend the time given the statutory framework within which the decision was made and which is intended to be applied consistently to those who come within its compass.

1. The one criterion that I have excluded from my general statement of principle in the previous paragraph relates to the merits of the application.  If an extension of time were granted and the application were lodged, would that application have reasonable prospects of success?  This is the one exception, for Parliament has separately recognised in s 42B of the AAT Act that the Tribunal may dismiss an application for the review of a decision if it is satisfied that, among other matters, it has no reasonable prospect of success.[11] 

   [11] AAT Act; s 42B(1)(b)

1. What is meant by the expression “no reasonable prospect of success” was considered by Gilmour J in Dandaven v Harbeth Holdings Pty Ltd[12] in the context of s 31A of the Federal Court Act 1976 (Federal Court Act).  Section 31A provides:

   [12] [2008] FCA 955

   “Summary judgment

   (1)The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:

   (a)the first party is prosecuting the proceeding or that part of the proceeding; and

   (b)the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding.

   (2)The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:

   (a)the first party is defending the proceeding or that part of the proceeding; and

   (b)the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.

   (3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:

   (a)hopeless; or

   (b)bound to fail;

   for it to have no reasonable prospect of success.

   (4)This section does not limit any powers that the Court has apart from this section.

   (5)This section does not apply to criminal proceedings.” (emphasis added)

1. Section 31A gives the Court power to enter judgment for the party prosecuting or defending a proceeding if the criteria are met.  That is consistent with the Federal Court’s role as the adjudicator of disputes between parties on the basis of pleadings.  The Tribunal does not have a role as an adjudicator.  Rather, its responsibility is as the reviewer of the merits of an administrative decision according to the law and on the evidence.  The differences in their roles account for the most obvious difference between s 42B(1)(b) of the AAT Act and s 31A of the Federal Court Act.  That difference is that, unlike s 31A, s 42B(1)(b) gives the Tribunal power to dismiss only the application of the applicant.  Consistently with the Tribunal’s responsibility, it does not give the Tribunal power to make a decision affirming the decision-maker’s decision. 

1. Despite that difference, some guidance is to be found in the cases that have considered s 31A.  As Gilmour J said in Dandaven v Harbeth Holdings Pty Ltd[13] in relation to whether there is “no reasonable prospect of success”, which lies at the heart of s 31A and is the only issue arising under s 42B(1)(b):

   [13] [2008] FCA 955 at [6]

   “Success under s 31A does not require a demonstration that the case is hopeless or bound to fail.  The following principles are of general application to an application under s 31A:  

   (a)the Court must be very cautious not to do a party an injustice by summarily dismissing proceedings;

   (b) the Court ought not dismiss a claim based on a predictive assessment of prospects, where it is possible that if the claim went to trial, it may succeed;

   (c) in a case where evidence can give colour and content to allegations, and where questions of fact and degree are important, the Court should be more reluctant to dismiss a proceeding on the face of a pleading;

   (d) it is not Parliament's intention to require the Court to engage in lengthy and elaborate trials on an interlocutory basis for the purposes of determining whether or not a proceeding has no reasonable prospects of success.  It may be necessary for the opposing party to provide no more than an outline of evidence, sufficient to show that there is a genuine dispute, to prevent the summary application becoming a trial;

   (e) if there is a real issue of fact or law to be decided, and the rights of the parties depend upon it, it is obviously appropriate that the matter goes to trial.  It cannot be said that where there is a real factual dispute and that factual dispute must be resolved to determine whether the claim succeeds that there is ‘no reasonable prospect of success’;

   (g)it ought not be used to shut out proceedings where, on a proposition of law, there may be room for doubt.  On questions of law, an inquiry as to their merit should not be for the purpose of resolving them and also not simply to determine whether the argument is hopeless, but in order to decide if it is sufficiently strong to warrant a trial;

   (h)evidence of an ambivalent character will usually be sufficient to amount to reasonable prospects;

   (i)in determining if there are real issues of fact in issue so as to preclude summary judgment the courts must draw all reasonable inferences in favour of the non-moving party.”[14] 

   [14] [2008] FCA 955 at [6] (paragraph (f) omitted in judgment)

APPLICATION OF PRINCIPLES REGARDING EXTENSION OF TIME

Broad principles relating to the levying of income tax

1. In this case, the focus is upon Ms Simpson’s prospects of success.  In order to consider those prospects, I have started with the Income Tax Act 1986 (ITA).  Income tax is imposed in accordance with that legislation and at the relevant rates imposed by the Income Tax Rates Act 1986.  That tax is paid for all financial years commencing on and after 1 July 1986.[15]  The Income Tax Assessment Act 1997 (ITAA97) is incorporated into, and read as one with, the ITA. Section 3-5(1) of ITAA97 provides that income tax is payable each year by each individual and each company as well as by some other entities.[16]  Section 4-10(1) provides that income tax must be paid by those persons for each financial year.  In Ms Simpson’s case, the financial year ended on 30 June as did her income year.

   [15] ITA97; s 7

   [16] See also ITAA97; s 4-1

1. The amount of income tax that is payable is worked out by using the formula:

   Income tax = (Taxable income x Rate) – Tax offsets.[17]

   [17] ITAA97; s 4-10(3)

2. The amount of taxable income is worked out by first adding up all of the taxpayer’s assessable income for a financial year and all of his or her deductions for that same year.  The total amount of deductions is then subtracted from the total amount of assessable income.  If the amount remaining is a positive figure, that is the amount of the taxpayer’s taxable income.  If it is a negative figure, the taxpayer does not have a taxable income but may have a tax loss.[18] 

   [18] ITAA97; s 4-15(1)

3. Assessable income includes income according to ordinary concepts (ordinary income) and statutory income[19] unless it is exempt income[20] or non-assessable non-exempt income.[21] The sale of Ms Simpson’s unit means that I must look to statutory income for the proceeds of sale are not ordinary income. Section 10-5 of ITAA97 sets out those provisions including in a taxpayer’s assessable income those amounts that are not ordinary income. Among those amounts are capital gains, which are the subject of s 102-5.

   [19] ITAA97; s 6-5(1) and ss 6-10(1) and (2)

   [20] ITAA97; s 6-20

   [21] ITAA97; 6-23

1. Capital gains are made and capital losses incurred only if a “CGT event” happens.  The gain is made or the loss incurred at the time of the CGT event.[22]  The amount of the capital gain or capital loss is worked out in the way described in the event.[23] 

[22] ITAA97; s 102-20

[23] Definitions of “capital gain” and “capital loss”: ITAA97; s 995-1(1)

1. Events that are CGT events are summarised at s 104-5.  The relevant CGT event in this case is CGT event A1 which occurs “when disposal contract is entered into or, if none, when entity stops being asset’s owner”.  A “CGT asset” is any kind of property or a legal or equitable right that is not property. [24]  Land and buildings are examples of CGT assets.  CGT event A1 is explained further in s 104-10.  CGT event A1 happens if a taxpayer disposes of a CGT asset.[25]  Section 104-10(2) explains that:

   [24] ITAA97; 100-25(2) and see also ss 108-5(1) and (2)

   [25] ITAA97; s 104-10(1). The expression “dispose of a *CGT asset” is defined to mean: “you dispose of a CGT asset (in its capacity as a CGT asset) in the circumstances specified in section 104-10.”: ITAA97; s 995-1(1).

   “You dispose of a *CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law.  However, a change of ownership does not occur if you stop being the legal owner of the asset but continue to be its beneficial owner.

   Note:A change in the trustee of a trust does not constitute a change in the entity that is the trustee of the trust (see sub-section 960-100(2)).  This means that CGT event A1 will not happen merely because of a change in the trustee.”

The capital gain from a CGT event A1 is the “capital proceeds from disposal less asset’s cost base” and the capital loss is the “asset’s reduced cost base less capital proceeds”. 

1. Deductions may be general deductions or specific deductions. The latter are amounts that a provision of ITAA97 allows a taxpayer to deduct from his or her assessable income.[26] The former, general deductions, are those that s 8-1 allows a taxpayer to deduct from his or her assessable income. In general terms, they are any loss or outgoing that is incurred in gaining or producing assessable income or necessarily incurred in carrying on a business for the purpose of doing so. Losses or outgoings of capital, or of a capital nature or of a private or domestic nature may not be deducted. Losses or outgoings incurred in relation to gaining or producing exempt income or non-assessable non-exempt income may not be deducted and nor may losses or outgoings be deducted if a provision of ITAA97 prevents its deduction.[27]

   [26] ITAA97; s 8-5

   [27] ITAA97; s 8-1(2)

Levying income tax in Ms Simpson’s circumstances

1. A person’s liability to pay income tax in any particular financial year is determined according to the law that applied in that financial year.  That is the law that I have set out above at [18] to [25].  Applying that law, Ms Simpson owned her unit however the word “own” is interpreted.  She was its legal proprietor and she owned both the legal and beneficial interest.   Her unit was her “property” and it was a CGT asset within the meaning of s 108-5(1).  When she entered the contract to sell the unit, she entered a contract to change both the legal and beneficial ownership of the unit from her to the purchaser.  That meant that she disposed of the CGT asset that was the unit.  By disposing of the unit, CGT event A1 occurred.  Disposal occurred in January 2016.  That meant that it occurred in the 2016 year of income even though the contract did not settle and Ms Simpson did not receive the proceeds of the sale until 21 December 2016 and so in the 2017 year of income.   

Ms Simpson’s submissions

1. Turning now to Ms Simpson’s submissions, she would have me treat the unit as if it were owned by a SMSF of which she was its member.  If I were to do that, CGT would be assessed differently.

1. In considering her submission, I have looked first at the Superannuation Industry (Supervision) Act 1993 (SIS Act), which regulates SMSFs.  The expression “self managed superannuation fund” has the meaning given by ss 17A and 17B of the SIS Act.[28]  A SMSF must have fewer than five members.  Assuming for the moment that any SMSF that Ms Simpson would want to establish would have only a single member, being herself, it would have to comply with s 17A(2).  The trustee of the SMSF may be either a body corporate or individuals.  In the case of a body corporate the member must be either the sole director of that body corporate or one of only two directors, who are related to each other or the member is one of two directors but not employed by the other director.  If the trustees are individuals, there may be only two of them and one must be the member and either both must be related to each other or the member is not an employee of the other director.[29]  Other requirements are set out in s 17B of the SIS Act.

   [28] SIS Act; s 10(1)

   [29] SIS Act; s 17A(2)

1. Under s 35A of the SIS Act, each trustee of a SMSF must, in respect of each year of income of the fund, ensure that accounts and statements are prepared in respect of the entity as required by s 35B(1).  For each year of income, each trustee of an SMSF must appoint an approved SMSF auditor to give the trustees a report.[30]  The SIS Act regulates contributions that are made to an SMSF.  In certain circumstances, an entity that was a SMSF at all times during a year of income is a complying superannuation fund during that same year of income.[31] A fund is a complying superannuation fund for the purposes of ITAA97 in relation to a year of income (the current year of income) if, and only if, the Regulator has given a notice to the trustee of the fund under s 40 stating that the fund is a complying superannuation fund in relation to the current year or has given a notice in relation to a previous year of income in the circumstances set out in s 45(1)(b).

   [30] SIS Act; s 35C(1)

   [31] SIS Act; s 42A

1. Division 295 of ITAA97 provides for the taxation of superannuation entities including complying superannuation funds.[32] Section 295-85 and 295-90 modify the application of other provisions of ITAA97 if a CGT event happens involving a CGT asset that was owned by various entities including a complying superannuation fund.

   [32] ITAA97; s 295-5(1)(a)

1. It follows that, if Ms Simpson’s unit had been held by an SMSF that was regarded as a complying superannuation fund, ss 295-85 and 295-90 of ITAA97 would have modified the application of ITAA97 in relation to the assessment of CGT. She submits that the Commissioner had a discretion to treat her asset as held by a SMSF and by a complying superannuation fund. The only relevant discretion that I have found is that of the Regulator under s 43(1)(b) of the SIS Act. In the case of a SMSF, the Regulator would be the Commissioner.[33]

   [33] See definition of “Regulator”: SIS Act; s 10(1)

1. And that is the point at which Ms Simpson’s argument must fail.  The Commissioner has a discretion to treat a SMSF as a complying superannuation fund with the consequence that modified CGT rules apply.  The Commissioner does not have any discretion to deem a SMSF to have existed.  He does not have power to deem a trust of any type to have existed for an SMSF is just a particular type of trust that complies with the rules I have pointed to in the SIS Act.  It was for Ms Simpson to establish a trust and to follow those rules as well as transfer ownership of the unit to that SMSF if she wanted the benefit of the modified CGT rules to apply to the sale of the unit.  She did none of that in all the years she owned the unit.  Therefore, the ordinary CGT rules applying to taxpayers generally apply to her and were applied by the Commissioner.

1. Ms Simpson wonders why the Commissioner refers to the rental income she obtained from the unit while she owned it.  She may well have quarantined the amounts she received as rent and, at first, used them to reduce her mortgage and, later, to purchase blue chip shares but she did so in her own name.  All of those rental amounts as well as the dividend amounts were returned in her income tax returns as her income.  Ms Simpson made choices as to what she would do with her income.  She cannot now change history to say that she held the unit on trust and that the trust was an SMSF and a complying superannuation fund.  Her dealings with the unit and with the income from it show that she dealt with it as an individual and that it was not held on any type of trust.

1. This is not a case in which any other view is reasonably open on the facts as Ms Simpson has presented them orally or in writing.  In view of that, I have concluded that her application does not have reasonable prospects of success.  In the absence of those prospects, I am not prepared to extend the time within which Ms Simpson may apply for review of the Commissioner’s objection decision dated 12 September 2017.  Therefore, I refuse Ms Simpson’s application that I do so.

I certify that the preceding thirty four (34) paragraphs are a true copy of the reasons for the decision herein of Deputy President S A Forgie

[sgd]........................................................................

Associate

Dated:  19 February 2019

Heard by telephone:	8 and 17 October 2018 and 13 December 2018
Applicant:	Self-represented
Solicitor for the Respondent:	Edward Cummings, Australian Taxation Office